FHA Home loan Highlight
It's easier to qualify for an FHA loan than for a conventional mortgage. FHA loan rules make allowances for borrowers who might not have an extensive credit history or who need to use gift money to make a down payment, for example. Here are the basic requirements to apply for an FHA loan:
Credit score of 500 or higher.
Debt-to-income ratio of 50% or less.
3.5% minimum down payment.
The home must meet the FHA's minimum property requirements and be your primary residence.
FHA mortgage insurance is mandatory for all FHA loans. Unlike the private mortgage insurance paid by conventional borrowers who put down less than 20%, FHA mortgage insurance can't be canceled just because you gain sufficient equity.
If you make a down payment that's under 10%, FHA mortgage insurance lasts for the life of the loan. With a 10% (or higher) down payment, you'll pay FHA mortgage insurance for 11 years.
FHA loans aren't just for single-family homes. Guidelines for buying FHA approved condos recently broadened, and you can also use an FHA loan to purchase a multifamily home or a manufactured home.
No matter the type of home, in nearly all cases it has to be your primary residence. For example, if you use an FHA loan to purchase a duplex, you need to live in one of the units. Investment properties aren't eligible for FHA loans.
While the FHA sets minimum requirements, individual FHA lenders may have stricter standards. For example, a lender might set their minimum credit score for an FHA loan at 580 rather than 500.
Lenders determine their own rates and terms, so as with any loan application, it is always a good idea to shop around and compare loan offers.